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Realty prospects brighter but overall decline still expected

Somluck Srimalee
The Nation June 28, 2014 1:00 am

The reason that the market will still decline, despite the current recovery, is that it took such a hit in the first quarter, when it contracted 40 per cent from the same period last year.

Although the residential-property market in Greater Bangkok has shown signs of recovery since the coup - with 40 per cent more units launched in May than in April - the market for the full year is expected to decline by 10-15 per cent, because of lower purchasing power and a particularly poor first quarter.

Meanwhile, construction business also looks set to recover in the second half, as construction projects that had been delayed since October are now being revived.

This is especially the case in the private sector, such as in the office-building, manufacturing, residential and hotel segments, according to leading construction companies.

A survey by the Agency for Real Estate Affairs shows new residential projects launched in Bangkok and its suburbs in May comprised 8,412 units, some 40 per cent higher than the 6,013 units launched in April.

"Since the coup on May 22, home-buyers' confidence has returned to the market. We have therefore revised our business plan from only 50 project launches worth Bt50 billion this year, to 60 projects valued at Bt60 billion," said Pruksa Real Estate president and chief executive officer Thongma Vijitpongpun.

However, he believes the market over the full course of the year will still drop by between 10 and 15 per cent, although this is a marked improvement on his prior estimate of a full-year decline of 20-30 per cent.

The reason that the market will still decline, despite the current recovery, is that it took such a hit in the first quarter, when it contracted 40 per cent from the same period last year. The current quarter, meanwhile, has fallen by 25 per cent year on year.

Although the market will recover over the second half, it will not be enough to turn things around into positive territory by year-end, he explained.

Thongma estimates that property-market value will come in at between Bt650 billion and Bt700 billion this year, below the Bt800-billion average of recent years.

Property Perfect CEO Chainid Adhyanasakul said demand for homes priced up to Bt5 million had started to return for condominiums, townhouses and detached housing since last month's coup.

Up to 70 per cent of visitors to the developer's project sites have decided to buy over the past four weeks, which is a sharp improvement on the 30-per-cent level earlier in the year, when potential home-buyers were delaying their purchasing decisions out of concern over the country's political problems.

However, now that the political landscape has changed and things are more stable, many of these people have decided to return to the market and take the plunge on buying a home, he said.

Construction upturn

Meanwhile, construction business has also started showing signs of recovery, in both the public and private sectors.

Ch Karnchang CEO Plew Trivisvavet said the National Council for Peace and Order's announcement of an economic road map to develop the country's road and rail infrastructure would drive construction-sector recovery, with many state projects being launched during the second half of the year.

The private sector, which had delayed manufacturing investment and adopted a wait-and-see approach to the NCPO's policy, has now also begun to expand its investment, especially in light of the Board of Investment's having kick-started the approval of new investment among those businesses applying for tax privileges and incentives.

Artit Teeparkornsukkasem, managing director of Chonburi Concrete Product, said demand for concrete had increased over the past two months when compared with the January-April period.

Most manufacturers that had delayed expansion are now ready to get construction under way and therefore need more raw materials to build their projects, he said.

"When the government's infrastructure projects are launched, they will boost demand for construction materials and the construction industry will quickly see strong growth," he added.